Thoughts,Things, on our Radar Today

Since the start of QE2 in November 2010, we have seen a complete transformation of markets based on a FED that believed/believes trickle down works.  This has led to a number of outcomes:

1) The paper asset markets (i.e. stocks) became a managed market where all downturns were attacked by the FED adding more stimulus.

2) The FED is now done adding liquidity to its Balance Sheet, while they said that they were ending it in October, there actually has been a slight trickle add that appears to have ended on December 24th.

3) The economy as measured by the top third of the population has benefited, the bottom two thirds, not.

4) The magnitude of the improvement of the top third have skewed the aggregate numbers to the point that establishment economists think they have a victory.  With housing out of the picture in terms of real growth, cheap money and stretched loan payment terms have attracted car buyers into more debt.

5) With the economy supposedly based 70 percent on the consumer, and 66 percent of the consumers stretched, coupled with a strong dollar putting pressure on exports, we see even more reason to be defensive.

6) Everyone who has followed the defensive posture since 2010 has been forced to take up philosophy, but the writing on the wall is becoming clearer and the real world is about to take over.